Good noises coming out of Asia

He recently returned from a 10-day market planning and development visit with chief executive Dan Coup to South Korea and China. Afterwards, Griffiths spent three days in Taiwan.

“In the past six months, 23 new velvet-based healthy food products have been launched in Korea; the majority of them using NZ velvet. A few are using Russian velvet as a point of difference,” he says.

“Yuhan Pharmaceuticals, which signed a memorandum of understanding with DINZ last year, is now a major player in this market. We visited their impressive New Origin concept store/cafe at a high-end mall in Seoul. It features recently launched products that contain NZ velvet and runs NZ deer farm imagery on large video screens inside.

“There has been an explosion in consumer demand for consumer-ready velvet-based products in Korea. Ten years ago this product category didn’t even exist. At the time we were dealing with a traditional Korean oriental medicine market that appeared to be in slow decline.”

Griffiths says the Chinese market for velvet has yet to make this leap, but many of the manufacturers he and Coup spoke to are aware of what has happened in Korea and believe it can be repeated in China.

“The main barrier is a lack of confidence in the path to market for consumer products based on NZ velvet. These products cost millions of dollars to develop and market, so manufacturers need to be convinced they are not infringing a rule or regulation along the way,” he says.

Griffiths says DINZ, based on discussions with Chinese regulators, believes there is no problem. But to provide confidence to potential customers, DINZ is working with some exporters and NZ Trade and Enterprise to commission a report by a respected Chinese regulatory expert on the pathway to market. This will be provided to key manufacturers when it has been completed.

“In the last three years – to improve consumer safety – there has been a major tightening of the rules and regulations governing food and traditional medicines in China. This has included tighter standards for overseas suppliers. As a result, NZ velvet producers have had to create clean areas in their deer sheds and to meet tougher cold chain requirements,” Griffiths says.

“In China, velvet processors have had to make similar upgrades. Some have built completely new factories.”

In a major move announced in March, a major new Chinese super ministry is being established that’s expected to have regulatory oversight of the trade in traditional medicines and manufactured health foods -- the State Administration of Marketing Regulation (SAMR). It will be supported in this by a new State Drug Administration that reports to the SAMR.

At the same time, the formerly powerful General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) is being dismantled. Its border inspection and quarantine role is being merged into China Customs, with the aim of streamlining import and export procedures.

Until the new regulatory regime is operating, Griffiths says manufacturers will be uncertain about the rules that will apply to their operations. A further unsettling factor has been the recent clamp-down on importers for importing illegal products and for evading customs duties. Some smaller velvet importers have been prosecuted.

“Larger, reputable importers say this will be a good thing in the long-run for the reputation of imported velvet and particularly for New Zealand. It will tidy up the industry.”

In the meantime, Griffiths says the traditional velvet market in China remains strong. Indeed, the clamp down on dodgy importers may further increase demand for NZ velvet, because buyers can be sure it meets all current Chinese regulatory requirements.

In Taiwan, Griffiths spoke to representatives of the local Deer Farmers Association. “They were interested to hear how the prolific marketing activity by large food companies in Korea had led to a general increase in velvet consumption. This had had a positive impact on Korean deer farmers.”

Griffiths also met with some leading food companies in Taipei who appeared very interested in the positive developments in the Korean market.

“With market access restricted for frozen velvet, exporting processed velvet that can be used as a premium health food ingredient is a natural next step.”

In the past six months, 23 new velvet-based healthy food products have been launched in Korea. Among them, a range from Yuhan Pharmaceuticals marketed through its New Origin concept stores